Multi - Time Frame Analysis ( With Example - Today's Sun Pharma Trade )

Multi - Time Frame Analysis is a great and simple way to execute trades. It ensures that we look at the overall picture before taking a trade just to be double assured for the trend and to properly locate support and resistances. In Multi - Time Frame analysis, we have to follow a top down approach , which basically means that we have to look at the larger time frames, then the next one ( smaller ) and then finally the one in which we have to take our final decision.

It is important to look at bigger time frames because sometimes what might look like a support to us in a smaller time frame, could be a resistance in a bigger one.

I traded Sun Pharma today  (Bought puts for intraday ), so i thought it would be better if i explained it to you with the help of this example.

This is the trade that i took.

I bought 450 strike price puts at 23.8 and sold it at 28.3. Will try to explain with the help of the following charts -

The first one is Weekly Chart.

Here you can see that i was looking at this resistance line and wanted to see how the price reacts at this level. As it was an important resistance zone and it had rejected the price earlier also from the same levels.

If we look at the Daily Chart now -

 In Daily chart, we can see that it tried to give a breakout above yesterdays high but did not and even came below yesterday's high. It came down with momentum and along with more than average volume. It was a sign that the weekly resistance was actually acting stiffly and so i decided to look at the hourly chart for further clarification.

This is the Hourly Chart now -

In Hourly chart, you can see that in the candle marked as 1- an indecision candle started to form at the top which sounded some bells that this could be giving an exhaustion sign.

In the candle marked as 2 - We saw a candle with a higher wick, which showed that there was definitely supply coming at this zone.

In the zone marked as 3 - There was a Bearish Engulfing candle and finally in candle 4 -it broke the previous candle low too. It was a decent sign to go short or buy puts at this point of time.

The Reason Why i DID NOT carry this trade for tomorrow -

However, the daily candle which formed today is looking bearish, but i decided not to carry this trade for tomorrow as it bounced back from the support zone ( last 2 day's low ) ( Check Chart Above ). It merely touched the same zone and bounced back today, so i decided that it's better to short again when i get a confirmation close.

I hope this article helped you in understanding the logic behind the trade and how you can use the same strategy to take these kinds of trades.

Disclaimer - This is an example and for education purpose only and not to be treated as a Buy or Sell signal.

Charts are used from Chartink website.

More Articles :-

How To Start Trading In Stock Market : 6 Steps for Beginners 

4 Biggest Intra Day Trading Mistakes and How To Avoid Them